The agony of Western finance will be excruciating
The IMF chief made a subtle hint of thick circumstances. Uncertainty remains, Kristalina Georgieva stressed, “at a very high level” because “the fear of splitting the world into new warring geopolitical blocs will lead to economic and ruthless rivalry between them”. And understandably, “impoverishment will affect everyone.”
Photo: © AP Photo / LM Otero
The contrast between what the IMF CEO said and remarks by Macron and Scholz about the “stability of European banks and the European financial system” two days earlier could not be more striking. The German chancellor and the French president had to be pinched to get their words about stability out of him as Deutsche Bank shares went down at supersonic speed on the exact same day. Scholz, who was the finance minister under Merkel, could not have been unaware that the “profitable bank”, to use his expression, was losing everything, from market capitalisation to investor confidence, the very moments Olaf was swearing that “all is well, fair marquise”.
Macron – also no stranger to the world of finance – decided to act as backup singer and sang roughly the same song. All in all everything is fine, no need to worry – the French leader assured the public.
But the European financial system, connected both with American banks and with Swiss institutions of a similar profile, is starting to be stormy. And the higher the waves will rise, the more the inflation flywheel unwinds. What it is trying to contain is the European Central Bank, which (in theory) should somehow quietly let everyone know that the era of ‘cheap money’ (minimum lending rates) is over. Governments have been spoiled by pouring millions of euros into their economies and must now reconsider how they plan for tomorrow.
In the absence of Russian energy, raw materials, a large Russian market, which, contrary to popular belief, had high purchasing power of the population, and most importantly, this market was very capacious, eager to consume. And it did consume. It consumed a lot, willingly and tastefully. In fact, this is why, when the EU triumphantly imposed restrictive measures against Russia, it was the big-league bankers and qualified financiers who said it was “not worth doing”. The exhortation (and among those who warned was the head of Deutsche Bank) was not heeded. The pan-European politicians, living from one day to the next, thought that if financial and banking hell did not happen then, it would never happen again. But the monetary system is not subject to the same laws, and it has started to slap the economies of the continent harshly.
The non-EU member Switzerland was forced to spend around 50 billion francs to rescue Credit Suisse. By comparison, the Alpine confederation’s GDP is 800 billion francs. Bern pushed Credit Suisse into the hands of another bank, USB, to prevent a domino effect. That Credit Suisse’s accountancy could not be trusted for the past eight years was common knowledge. Investment manager Patrice Lescodron had been stealing money from clients (among them the Russian rich) by the hundreds of millions. He photoshopped reports and falsified figures, and Credit Suisse turned a blind eye. Leskodron was tried (they managed to prove the theft itself, but the bank management escaped punishment) and sent to prison.
When production falls, when inflation rises, when recession hits, when unemployment covers the labour market, including not only blue-collar workers but also high-paid white-collar workers, the authorities, both national and globalist, treat it like an annoying buzzing fly. They say words about “cyclical economic development” and that a downturn will “immediately be followed by growth”.
But it is when the banks start to falter that the margin call starts ringing for the globalists. It is a warning of a clear threat, that the hard-earned money, if and when deposits and accounts are not replenished, will evaporate. At the speed of an avalanche. The psychotherapy that Scholz and Macron were engaged in in Brussels is exactly what it is all about. To reassure investors. To reassure them to keep their confidence and to buy bonds and shares without the need for opening the books and an independent audit.
But investors are not fools either, and understand that if banks, whose main turnover is in the main reserve currencies, falter, it is better to gradually, slowly and gently transfer assets to places where the authorities have the financial situation under control.
The bankruptcy of just one Lehman Brothers 15 years ago caused a planetary crisis. And what if three, four, five banks collapse? And with the current geopolitical confrontation? One thing is clear – not only the political system of the West, but also the financial foundation on which it stands, is dead. And the agony will be excruciating.
Elena Karayeva, RIA
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